The Star Online (10/10/2018) - KUALA LUMPUR: Palm oil companies will see declining or slow growth in revenue and margins in FY2018-19 as prices stay weak, Fitch Solutions says.
In its report issued on Tuesday, it said prices will remain weak in coming months.
It expects crude palm oil prices to average RM2,340 a tonne in 2018; versus RM2,704 in 2017.
Strong U.S. dollar over most of this year may mitigate impact on earnings
Palm prices estimate to average RM2,400 a tonne.
Fitch said companies with plantations in Malaysia likely to struggle more due to “significant hurdles to production” that’s linked with labour shortages.
* Probability of El Nino has increased, a “fully blown” El Nino would impact palm sector
* Indonesia already suffering from dry weather conditions which may hurt output in 2019
* Companies will keep capex lower to focus on improving yields and sustainability
* "M&A activity may accelerate due to stringent rules on plantations, as acquiring young palm estates could support earnings growth
* "Poor sustainability practices are a risk to business, may threaten global palm oil demand
*"Producers also facing stagnating yields, peaking planted area in Southeast Asia, labour issues
* "Rising minimum wages, tighter immigration laws are hurting production in Malaysia," it said. – Bloomberg
Read more at https://www.thestar.com.my/business/business-news/2018/10/10/palm-oil-firms-face-challenges-on-weak-prices-sustainability-says-fitch/#uOAyKZw5WzRddp89.99